dYdX Chain To Launch Testnet Next Week

dYdX, the leading decentralized exchange crypto perpetuals, plans to launch a public testnet for its forthcoming dYdX Chain on July 5.

dYdX Chain will comprise a standalone Layer 1 blockchain based on Cosmos and its Tendermint proof-of-stake consensus protocol. Once the chain is live, dYdX will launch its v4 iteration on the network, transitioning the project away from the Ethereum network.

“dYdX v4 will feature a fully decentralized, off-chain order book and matching engine capable of scaling to orders of magnitude more throughput than any blockchain can support,” the project said in an announcement.

dYdX is currently the top decentralized exchange by 24-hour volume with $827M, according to CoinMarketCap. The DYDX token is up 4% over the same period.

Appchain Model

The impending launch of dYdX Chain comes as top scalability teams are competing to build infrastructure “appchains,” also called Layer 3 networks in the context of Ethereum, that are dedicated to hosting a single application.

While dYdX opted to build its own appchain, Arbitrum, Polygon, and ZkSync are all making moves to stake their claim to the burgeoning Layer 3 sector, despite their ongoing work on Layer 2. Their Layer 3 solutions are designed to support high-throughput applications such as decentralized social media, web3 gaming, DEXes, and enterprise DLT.

dYdX Chain

dYdX first announced it was working on building a Cosmos-based chain in June 2022. The team said it believes migrating to an appchain “gives dYdX the best shot at developing a network that could offer a long-term competitive product experience with centralized exchanges.”

The team said they are targeting a throughput increase of orders of magnitude once the new chain is live, with the current L2 deployment of the dYdX exchange limited to 10 trades and 1,000 orders every second.

“The fundamental problem with every L1 or L2 we could develop on is that none can handle even close to the throughput needed to run a first-class order book and matching engine,” dYdX said.

dYdX scheduled the testnet’s launch after deploying an internal testnet and amassing an external validator set exceeding 40 node operators. The DYDX token will function as the network’s native token following its mainnet launch.

The protocol distributed the token to early adopters in a September 2021 airdrop worth more than $1B at the time.